The SEP Couch

In this podcast, Tim Pohlmann, CEO and Founder of IPlytics, hosts discussions with industry leaders, academics and policy makers on current topics around standard essential patents (SEPs) and as they relate to FRAND, licensing, litigation, dealmaking, policy, and regulation as well as general trends for markets where SEPs matter. Invited guests are interviewed in a 45-minute podcast format expressing their personal views on topics under discussion among IP professionals when it comes to essential IP. This podcast encourages an open discussion format while it remains neutral to the controversial opinions and viewpoints of invited guests.

Podcast Episodes

#4 Justus Baron | An economist’s view on FRAND in light of the current SEP policy debate

Justus Baron (PhD) is a Senior Research Associate at the Center on Law, Business, and Economics at Northwestern University’s Pritzker School of Law. His previous research positions include Mines ParisTech, Cerna (2009-2012) and Sciences Po Paris, Department of Economics as an Adjunct lecturer and researcher (2012-2013). He has also served as a visiting researcher at the Hitotsubashi University, Institute of Economic Research and Technische Universität Berlin, Chair of Innovation Economics. Justus met Tim during his PhD in 2009, when they worked together in Berlin and Paris. In 2009 they were among the first economists to use patent declarations data from SSOs such as ETSI, IEEE or ITUT to empirically study the interplay of patents and standards.

Today, Justus’ research on technology standards and SEPs has been published in leading academic journals, including Research Policy, the Journal of Economics, Management, and Strategy, and the International Journal of Industrial Organization. Justus has authored several policy reports on FRAND licensing and standards organizations, in particular for the European Commission; and he was a member of the European Commission’s SEP Expert Group. Just recently the European Commission (DG GROW) has commissioned a new study to a consortium led by Justus and Tim and other consortium members, assisting the European Commission with an “Economic Impact Assessment on Standard Essential Patents (SEPs)”.

In the Podcast Justus elaborates on the topics that this empirical research study will cover, including the identification of potential inefficiencies and costs both for SEP holders and standard implementors in the process of agreeing to a FRAND license. Justus addresses several of the big questions around SEP licensing, such as what stage in the value chain SEPs will be licensed and how one can define a FRAND rate. Justus also sheds light on questions like how should regulators such as the EU Commission be involved and who defines the standards on how FRAND should be negotiated? Should standards organizations be involved in SEP determination or FRAND rate discussions? Such questions of governance must be answered by studying the impact of regulation and what incentivizes these sets. Justus feels that as an empirical economist, he can contribute to a better understanding of some complex aspects of FRAND and SEP licensing.

Transparency about SEP issues is important, but here transparency also means to be transparent about the limitations of data and empirical analysis. In the end, the available information is never perfect and we have to consider that in any analysis that we do. In his work for the European Commission’s SEP Expert Group, it was very important to reflect different views and to produce a balanced report. In order to keep that balance, the report reflects many individual experts’ viewpoints and specific recommendations, rather than aiming for a consensus view on inherently controversial issues. That in the end may have also been why some criticized the European Commission’s SEP Expert Group final report as falling short of resolving some of the open controversies. Justus is among the leading economists that study SEPs, and he believes the next years will be even more interesting when the licensing of SEPs for IoT will start to pick up.

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#3 Luke McLeroy | How the Avanci patent license program may influence the next technological revolution

Luke is an intellectual property attorney with 15 years of experience negotiating collaborative solutions for patent holders and technology developers. He was involved in some of the very early standard essential patent litigations representing Nortel and Ericsson working as an associate and then a principal at the law firm McKool Smith in Dallas. Luke went on to work for Ericsson where he led the company’s North American patent licensing business. In this role, he helped develop and license Ericsson’s patent portfolio, analyzing and valuing patent portfolios in multiple technology areas such as wireless connectivity, codecs, data networks, and security, and advocating policy positions to legislative bodies, competition agencies, standard-setting organizations, and other forums. Today Luke is the Senior Vice President – Business Development at Avanci, a licensor collective program for 2G, 3G and 4G SEPs for the automotive application.

“The Avanci 5G patent pool is set to launch in 2022”

In the interview Luke elaborates on the licensing model of Avanci and how they solved the chicken and egg problem with having first company join as licensors (8 initial members) and having BMW as the first automotive OEM to become a licensee. Luke also elaborated on the revenue sharing model among the SEP licensors and that they go beyond simple patent counting but also use other indicators of SEP value such as standard contributions as well as patent portfolios that have been successfully licensed before.

Luke identifies challenges with licensing SEP to automotive OEMs due to earlier agreements in the supply chain where the costs of SEP royalties were not considered. Now OEMs have to go back to the suppliers to negotiate to share the costs of the SEP license. Often, when OEMs and suppliers come to an agreement about how these costs are shared, OEMs are set to join Avanci.

Luke also discusses how a one stop shop license program such as Avanci benefits the IoT industry and that Avanci will launch a 5G patent pool next year. This 5G patent pool will likely have different offerings in terms of technology packages to accommodate the different use cases of connectivity in a car.

#2 Jon Putnam | How to determine a FRAND rate for standard essential patents?

Jon Putnam founded Competition Dynamics as a platform for economic research and testimony at the intersection of intellectual property, competition, and international trade law. From 2001 to 2005, Dr. Putnam held a professorship in the Law and Economics of Intellectual Property at the Centre for Innovation Law and Policy, University of Toronto. Dr. Putnam has also held academic appointments at the Boston University Graduate School of Management, Columbia University Schools of Law and Business, Vassar College, and Yale College. Dr. Putnam has been retained in more than 100 consulting engagements and has testified more than 40 times in patent, antitrust, copyright, trade secret, contract and tax actions in federal, state and bankruptcy courts; before the US Federal Trade Commission, International Trade Commission, and Tax Court; in US and international arbitrations; and in regulatory proceedings in Canada and India.

“We had access to all SEP license contracts since the year 2000 (FTC v Qualcomm subpoena) to compare the royalty rates. It turned out the rates per patent are the same across, 2G, 3G and 4G.”

In the interview Jon revealed some of the SEP related litigation cases he worked on. In one case, the Qualcomm ITC litigation, all US based SEP cross licensing agreements were subpoenaed. That why Jon and his team was able to create a database how much royalties per paid for 2G, 3G and 4G per SEPs. The results confirm that the price per patent did not increase in standard generation advances. Which in his opinion makes sense as the same R&D efforts and spending per patent was conducted by the companies.

In another litigation case, Jon and his team looked at in total 8 SEP determination studies for 2G, 3G and 4G. The argument is that expert witness reports that e.g. use a sample of declared patent to extrapolate this to the overall number of SEPs per standard are biased and the sample as well as the claim charting method is not straight forward and different experts arrive at different results. In light of these disagreements and findings of unreliability, Jon and his team developed a comprehensive method to estimate the likelihood of essentiality for each major contributor’s patent portfolio. Here they took into account systematic differences in essentiality probabilities across the studies, contributors and standards. This method aggregated all available information across the studies, and thus forms the single best estimate of essentiality for any given contributor’s portfolio. Jon argues that “best estimate” is therefore the single best observable proxy for the unobservable beliefs held by each party to portfolio licensing negotiations. Jon and his team also relied on this method as part of computing the relative strengths of industry patent portfolios to predict the payments observed in SEP licenses, in the recent Apple v Qualcomm litigation. The results show that expectations of each portfolio’s essentiality rate are an important component of the portfolio’s relative strength.

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#1 Tim Pohlmann – Why SEPs Matter? A Market Assessment

In this very first podcast episode, Tim Pohlmann, CEO and Founder of IPlytics, kicks off the topics he will talk about in upcoming episodes. Here Tim will invite industry leaders, academics, and policy makers on his “SEP Couch” to discuss current topics around standard essential patents (SEPs) licensing, deal making, patent pooling, litigation as well as policy and regulation around FRAND. Guests are interviewed in a 45-minute discussion elaborating on their career background and discussing what’s currently debated around SEPs in the market. This podcast format encourages an open discussion while it remains neutral to the controversial opinions and viewpoints of invited guests. Tim also provides background on his own career and how he got involved with SEPs and standards starting as PhD in 2009 at the TU Berlin to then work as a post doc at CERNBA MinesParis Tech, as a consult and then founding IPlytics in 2014.